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Reconciling Estimates of the Value to Firms of Reduced Regulatory Delay in the Marketing of Their New Drugs

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  • Daniel R. Wilmoth

Abstract

The prescription drug user fee program provides additional resources to the US Food and Drug Administration at the expense of regulated firms. Those resources accelerate the review of new drugs. Faster approvals allow firms to realize profits sooner, and the program is supported politically by industry. However, published estimates of the value to firms of reduced regulatory delay vary dramatically. It is shown here that this variation is driven largely by differences in methods that correspond to differences in implicit assumptions about the effects of reduced delay. Theoretical modeling is used to derive an equation describing the relationship between estimates generated using different methods. The method likely to yield the most accurate results is identified. A reconciliation of published estimates yields a value to a firm for a one‐year reduction in regulatory delay at the time of approval of about $60 million for a typical drug. Published 2015. This article is a U.S. Government work and is in the public domain in the USA.

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  • Daniel R. Wilmoth, 2015. "Reconciling Estimates of the Value to Firms of Reduced Regulatory Delay in the Marketing of Their New Drugs," Health Economics, John Wiley & Sons, Ltd., vol. 24(12), pages 1651-1656, December.
    • Handle: RePEc:wly:hlthec:v:24:y:2015:i:12:p:1651-1656
    DOI: 10.1002/hec.3166
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    References listed on IDEAS

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    2. Grabowski, Henry G. & Vernon, John M., 1994. "Returns to R&D on new drug introductions in the 1980s," Journal of Health Economics, Elsevier, vol. 13(4), pages 383-406.
    3. DiMasi, Joseph A. & Hansen, Ronald W. & Grabowski, Henry G., 2003. "The price of innovation: new estimates of drug development costs," Journal of Health Economics, Elsevier, vol. 22(2), pages 151-185, March.
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